Finland has seen differing sessions of house prices rising and falling due to varied reasons. House prices or prices of any property for that matter depend upon the demand in the market, the strength of the economy and the prevailing interest rates. In the 1990s, Finland saw a surge in the demand for new asuntojen hinnat with the boom in its economy. However, the current trend prevailing in the property market is that of house prices falling. The reasons attributed to this trend are the absence of the causes that result in the price boom, that is, low interest rates, strong economy with disposable incomes to invest.
Finland like the rest of the European countries is reeling under the pressure of a sluggish economy, which has created a credit crunch for the inhabitants. With the economy going slow, the Finnish people do not have extra disposable income to invest in property. The demand for houses therefore, has fallen, resulting in the house prices falling. Along with this, the market has become interest-rate sensitive. This means that as the interest rate on loans for new houses raises, the demand for houses falls. Global recession along with the change in the interest rates has put the brakes on the house prices.
Along with this, Finland is seeing slow rental growth with the private rental market being distorted due to the social housing sector aided by the Government. The subsidized rents on the government houses are lower than that of the private rents, again leading to decreased demand for private dwellings. The low yields on the private houses along with the subsidized government rents are putting pressure on the new construction, which is constantly seeing a slow trend. All these factors are contributing towards the house prices falling in Finland.